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  Overhaul

  An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry

  Steven Rattner

  * * *

  HOUGHTON MIFFLIN HARCOURT

  BOSTON NEW YORK

  2010

  * * *

  Copyright © 2010 by Steven Rattner

  All rights reserved

  For information about permission to reproduce selections from this book,

  write to Permissions, Houghton Mifflin Harcourt Publishing Company,

  215 Park Avenue South, New York, New York 10003.

  www.hmhbooks.com

  Library of Congress Cataloging-in-Publication Data

  Rattner, Steven.

  Overhaul : an insider's account of the Obama administration's emergency

  rescue of the auto industry / Steven Rattner.

  p. cm.

  Includes index.

  ISBN 978-0-547-44321-8

  1. Automobile industry and trade—Government policy—United States.

  2. Bankruptcy—Government policy—United States. 3. Industrial policy—

  United States. 4. United States—Economic policy—2009– I. Title.

  HD9710.U52R38 2010

  338.4'76292220973—dc22 2010033188

  Book design by Melissa Lotfy

  Printed in the United States of America

  DOC 10 9 8 7 6 5 4 3 2 1

  * * *

  FOR MAUREEN

  * * *

  Contents

  Cast of Characters [>]

  Prologue [>]

  1. Dead Man's Curve • [>]

  2. The Bridge to Obama • [>]

  3. Mr. Rattner Goes to Washington • [>]

  4. "F**k the UAW" • [>]

  5. Rick, Bob, and Sergio • [>]

  6. The B Word • [>]

  7. "Is This Unanimous?" • [>]

  8. Jimmy Turns Bright Red • [>]

  9. Chrysler's Last Mile • [>]

  10. Harry Wilson's War • [>]

  11. Epic Bankruptcy • [>]

  12. Dealer Nation • [>]

  13. The Chief Executive Shuffle • [>]

  Epilogue • [>]

  Note on Sources [>]

  Acknowledgments [>]

  Index [>]

  * * *

  Cast of Characters

  TEAM AUTO (U.S. Treasury, unless otherwise noted)

  RON A. BLOOM

  CLAY CALHOON

  BRIAN DEESE (National Economic Council)

  DIANA FARRELL (National Economic Council)

  MATTHEW FELDMAN

  ROBERT FRASER

  SADIQ MALIK

  DAVID MARKOWITZ

  PAUL NATHANSON

  BRIAN OSIAS

  STEVEN RATTNER

  BRIAN STERN

  HALEY STEVENS

  HARRY WILSON

  ADVISERS TO AND STAKEHOLDERS IN CHRYSLER

  ALFREDO ALTAVILLA, in charge of Fiat power-train technologies

  STEPHEN FEINBERG, managing partner of Cerberus Capital Management (owner of Chrysler)

  ANDREW HORROCKS, former managing director of UBS (adviser to Fiat)

  THOMAS LAURIA, partner of White & Case (counsel to certain Chrysler senior lenders)

  JAMES "JIMMY" LEE JR., vice chairman of JPMorgan Chase (Chrysler senior lender)

  ROBERT MANZO, executive director of Capstone Advisory Group (adviser to Chrysler)

  SERGIO MARCHIONNE, CEO of Fiat; later appointed CEO of Chrysler (since June 2009)

  ADVISERS TO TEAM AUTO

  XAVIER MOSQUET, senior partner of Boston Consulting Group

  JOHN RAPISARDI, partner of Cadwalader, Wickersham & Taft (counsel)

  TODD SNYDER, managing director of Rothschild

  JOHN "JACK" WELCH JR., former chairman and CEO of General Electric

  BUSH PERIOD

  JOSHUA BOLTEN, White House chief of staff

  CARLOS GUTIERREZ, secretary of Commerce

  KEITH HENNESSEY, director of the National Economic Council

  DAN JESTER, Treasury contractor

  JOEL KAPLAN, White House deputy chief of staff for policy

  HENRY "HANK" PAULSON, secretary of the Treasury

  JOSHUA STEINER, Obama transition adviser

  CANADA

  PAUL BOOTHE, senior associate deputy minister of Industry Canada

  CHRYSLER

  ROBERT KIDDER, chairman (since June 2009)

  RONALD KOLKA, CFO

  THOMAS LASORDA, copresident

  ROBERT NARDELLI, chairman and CEO

  JAMES PRESS,co-president

  CONGRESS

  SEN. ROBERT CORKER (R-Tennessee)

  SEN. CHRISTOPHER DODD (D-Connecticut)

  REP. BARNEY FRANK (D-Massachusetts)

  REP. STENY HOYER (D-Maryland), House majority leader

  SEN. MITCHELL MCCONNELL (R-Kentucky), Senate minority leader

  REP. NANCY PELOSI (D-California), Speaker of the House

  SEN. HARRY REID (D-Nevada) Senate majority leader

  SEN. CHARLES SCHUMER (D-New York)

  FINANCIAL REGULATORS

  SCOTT ALVAREZ, general counsel of the Federal Reserve Board

  SHEILA BAIR, chairman of the Federal Deposit Insurance Corporation

  BEN BERNANKE, chairman of the Federal Reserve Board

  ROBERTA MCINERNEY, deputy general counsel of the Federal Deposit Insurance Corporation

  CHRISTOPHER SPOTH, senior deputy director for supervisory examinations at the Federal Deposit Insurance Corporation

  FORD

  LEWIS BOOTH, CFO

  WILLIAM "BILL" FORD JR., executive chairman

  ALAN MULALLY, CEO

  ZIAD OJAKLI, group vice president of government and community relations

  GENERAL MOTORS

  DANIEL AKERSON, CEO (as of September 2010)

  DAVID BONDERMAN, director

  TROY CLARKE, president of GM North America

  KENNETH COLE, vice president of global public policy and government relations

  GARY COWGER, group vice president of global manufacturing and labor relations

  NICHOLAS CYPRUS, controller and chief accounting officer

  GEORGE FISHER, lead director (until July 2009)

  STEPHEN GIRSKY, director; later appointed vice chairman of corporate strategy and business development

  FREDERICK "FRITZ" HENDERSON, COO; later appointed CEO (March-December 2009)

  KENT KRESA, director and interim chairman (March-July 2009)

  MARK LANEVE, vice president of sales and marketing of GM North America

  PHILIP LASKAWY, director

  CHRISTOPHER LIDDELL, CFO (since January 2010)

  ROBERT LUTZ, vice chairman and responsible for global product development

  KATHRYN MARINELLO, director

  PATRICIA RUSSO, lead director

  JOHN SMITH, group vice president of corporate planning and alliances

  CAROL STEPHENSON, director

  G. RICHARD WAGONER, chairman and CEO (until March 2009)

  EDWARD WHITACRE, chairman (July 2009 to December 2010) and CEO (December 2009 to September 2010)

  RAY YOUNG, CFO; later appointed vice president of GM International Operations

  MICHIGAN POLITICIANS

  DAVID BING (D), mayor of the city of Detroit

  REP. JOHN DINGELL (D)

  GOV. JENNIFER GRANHOLM (D)

  SEN. CARL LEVIN (D)

  REP. SANDER LEVIN (D)

  SEN. DEBORAH STABENOW (D)

  OTHERS

  ALVARO "AL" DE MOLINA, CEO of GMAC

  CARLOS GHOSN, CEO of Renault-Nissan

  JOHN MCELENEY, chairman of National Automobile Dealers Association

  TREASURY DEPARTMENT

  STEPHANIE CUTTER, chief spokesperson

 
; JENNI ENGEBRETSEN LECOMPTE, spokesperson

  KENNETH FEINBERG, special master for TARP executive compensation

  TIMOTHY GEITHNER, secretary of the Treasury

  ALAN KRUEGER, assistant secretary for economic policy

  MARK PATTERSON, chief of staff

  GENE SPERLING, counselor to the secretary of the Treasury

  UNITED AUTO WORKERS

  RON GETTELFINGER, president

  GENERAL HOLIEFIELD, vice president and director of Chrysler department

  BOB KING, vice president and director of Ford department; later elected president

  CAL RAPSON, vice president and director of General Motors department

  ANDREW YEARLEY, managing director of Lazard (UAW's financial adviser)

  U.S. BANKRUPTCY COURT, SOUTHERN DISTRICT OF NEW YORK

  JUDGE ROBERT GERBER, oversaw the bankruptcy proceedings of General Motors

  JUDGE ARTHUR GONZALEZ, oversaw the bankruptcy proceedings of Chrysler

  WHITE HOUSE

  DAVID AXELROD, senior adviser to the President

  RAHM EMANUEL, chief of staff

  ROBERT GIBBS, press secretary

  AUSTAN GOOLSBEE, member of the Council of Economic Advisers

  CHRISTINA ROMER, chair of the Council of Economic Advisers

  LAWRENCE SUMMERS, director of the National Economic Council

  * * *

  PROLOGUE

  THE OVAL OFFICE has no proper waiting room, only a small anteroom in which President Obama's "body person," Reggie Love, and his secretary, Katie Johnson, are usually seated. Against the wall is a small TV, normally used to monitor news channels. But on this Sunday evening near the end of March 2009, it was tuned to the Arnold Palmer Invitational golf tournament, where Tiger Woods (then still heroic) was making a long-awaited return from knee surgery.

  A few minutes before 7:30 a handful of us from the President's auto industry task force had followed chief economic adviser Larry Summers down a narrow flight of red-carpeted stairs and along a short corridor to this room. We'd spent the past hour in the rabbit warren of offices on the second floor of the West Wing, reviewing once more the key documents for a nationally televised announcement President Obama was to make the next day, the seventieth of his presidency. For Obama, this would be among his first major public actions; for our little task force, it was the point of no return.

  Since the task force's hasty formation in February, we had been meeting with General Motors and Chrysler, both of which were being fed intravenously with taxpayers' cash. Dozens of consultants, investment bankers, and other outside experts had presented their views, and the question of what the government should do with the struggling automakers had been debated extensively up the administration chain of command. Finally, in tense meetings at the White House a few days before, the President had made his decisions. Those decisions had remained secret until now; tonight he would call the Michigan lawmakers to alert them to what he was planning to say the next day.

  The President hadn't come downstairs from his living quarters yet, giving us a few minutes to root for Tiger's comeback—for me, a welcome distraction from worrying about whether our plans for the largest government intervention in industrial America since World War II could work. We had had only five frenzied weeks to prepare for this moment. One more time I mentally reviewed those plans, which included additional billions in taxpayer funding for General Motors and Chrysler and several other controversial and risky measures. What could go wrong? I'd asked myself over and over. As a prime mixer of the strong medicine that the President was about to administer, I was sure that if disaster ensued, all eyes would be on me.

  In particular, I worried about the much-discussed prospect of putting the automakers into "controlled bankruptcy," a radical approach that defied conventional wisdom. While the President's speech the next day would leave open the possibility that bankruptcies might be avoided, I knew that the mere mention of it—let alone actually taking the step—risked imploding the auto companies, crippling thousands of related businesses, vaporizing millions of jobs, and intensifying what was already a deep recession across the Midwest. With America in the midst of the worst financial crisis since the Great Depression, this was no hyperbole: the failure of the auto companies could endanger the economy in ways that were almost too frightening to contemplate.

  The President arrived a few minutes late (Tiger was playing a particularly crucial hole), dressed in khakis and a black zippered jacket. I was not surprised that he was wearing casual clothes—I had on khakis myself. Since President Obama's arrival in the White House, shirtsleeves had become the Oval Office norm, and on weekends almost anything went—even T-shirts and jeans worn by unshaven, sockless men.

  While his dress was informal, the President's mood was resolute. He had the air of a man in the business of calmly executing his decisions, not second-guessing them. After he'd chatted briefly with Reggie about the golf match, we followed him into the Oval Office, where he sat behind his desk, bare but for a folder of talking points for his calls.

  Katie dialed him first into a conference line on which four lawmakers awaited: Michigan's two senators and two of its congressmen. Delegations from our task force had been meeting regularly with them—tense, often testy sessions in which we were lectured about the importance of helping this critical industry.

  We clustered around a phone across the room from the President's desk, by the armchair in front of the fireplace where he sat during meetings. Katie had activated the phone's speaker so we would all be able to listen in, but it barely functioned—probably installed by a "well-connected government contractor," the President joked.

  He worked through his talking points, fluidly detailing the next day's announcements. Then he paused to let the legislators speak. John Dingell, the longest-serving member of the House of Representatives in history, was gracious and statesmanlike. The others were audibly on edge, although considerably more polite and restrained in conversation with the President than they had been in their meetings with us.

  Congressman Sander Levin seemed to interpret the President's allusions to bankruptcy for GM and Chrysler as just a negotiating tactic. "I understand that you have to refer to bankruptcy to get people to the table," he began.

  The President interrupted in a measured tone: "I don't want you to leave with that impression. I'm telling you that because it's a real possibility."

  At this, a chorus of anxious voices crackled through the speaker. Senator Debbie Stabenow urged that if the President was going to send such a tough message, he ought to couple it with a strong statement of support for the auto industry. Senator Levin beseeched him not to use a broad brush in criticizing the companies and to acknowledge the progress that they had made.

  The President listened carefully. When he brought the call to a close after about thirty minutes, he asked Larry to take another look at the speech. By the following morning we'd responded by sanding down the criticism of the companies and adding the "Cash for Clunkers" program to bolster car sales.

  The next call was to Governor Jennifer Granholm of Michigan. I'd gotten to know her as an energetic, dynamic candidate during her 2006 campaign, but Michigan was suffering the nation's highest unemployment rate, and in our more recent conversations she'd seemed beaten down and demoralized. Now, as she listened to the President outline his plans, her spirits seemed to fall further and her voice barely rose above a whisper.

  "I hope you know what you're doing," she said softly.

  During the final call, Ron Gettelfinger, head of the United Auto Workers, who had been defiant the previous autumn when Detroit first asked for federal help, was low-key and respectful now. This augured well for the tough discussions we knew we needed to have with him.

  When his calls were completed, the President walked out of the Oval Office and back to the small TV, to learn that Tiger had hit a birdie putt on the eighteenth hole to win. Tiger's day may have ended, but for the task force, a night of work was just beg
inning.

  1. DEAD MAN'S CURVE

  FOUR MONTHS EARLIER, on the day before Thanksgiving, I was about to leave my office to take one of my sons to a matinee of Speed-the-Plow on Broadway when the phone rang. It was Larry Summers, who'd just been named chief economic adviser to Barack Obama, the President-elect. "I'm calling with a hypothetical question," Larry said. "If you were asked to take on a six- to twelve-month assignment for the administration, would that be something that could work for you?" I replied that such an arrangement would be complicated, but all the same, it was something I'd be happy to consider.

  For most of my career, I had majored in Wall Street and minored in Washington. I'd built a career in investment banking and private equity, limiting my involvement in politics to fundraising, serving on a few think-tank boards, and writing the occasional op-ed. While I'd flirted with government service in the past, the beginning of this new administration seemed like a compelling moment to step up. Our country was facing the greatest financial and economic crisis since the Great Depression; when would the skills of a finance guy like me possibly be more useful? If I hung back this time, what would I be saving myself for?

  I hadn't worked in D.C. since the days of Jimmy Carter, and then not as a government official but as a reporter for the New York Times. I'd fallen into the job in 1974, starting as a news clerk for the Times"s legendary columnist James "Scotty" Reston. Arriving in the capital two months before Richard Nixon's resignation was a dizzying experience for a twenty-one-year-old college graduate. A few years later I was a full-fledged Washington correspondent, responsible for covering what in the face of OPEC and stagflation were the two most important domestic issues facing the Carter administration: energy and the economy.

  Then came the election of Ronald Reagan. Some of the stories I wrote were deeply skeptical of supply-side economics, to the point where I found myself attacked on the Wall Street Journal editorial page. My superiors decided that this would be an excellent moment for me to move to London to cover European economics.